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Konjunkturinstitutet - National Institute of Economic Research Working Papers, Konjunkturinstitutet - National Institute of Economic Research

No 133:
Challenges in Soft-Linking: The Case of EMEC and TIMES-Sweden

Anna Krook Riekkola, Charlotte Berg (), Erik O. Ahlgren and Patrik Söderholm

Abstract: The aim of this study is to develop a method for how to soft-link a Computable General Equilibrium (CGE) model with a energy system model. The central research question is how the interaction between modellers and models can, both qualitatively and quantitatively, enable and facilitate a transparent energy and climate policy decision-making process at the national level. The paper describes this development in detail, and presents and discusses the results of the soft-linking methodology applied to a climate scenario. Important similarities and differences between two Swedish models, i.e. EMEC (a CGE model) and TIMES-Sweden (an energy system model), are identified. These findings are used to develop a robust and transparent method to translate simulation results between the two models, resulting in intermediate ‘translation models’ between EMEC and TIMES-Sweden. EMEC provides demand input to TIMES, while TIMES provides feedback on the energy efficiency parameters, the energy mix, and the prices of electricity and heat. These ‘translations’ can also be used stand-alone to feed into other energy system models. The presented soft-linking process demonstrates the importance of linking an energy system model with a macroeconomic model when studying energy and climate policy. With the same exogenous parameters, the soft-linking between the models results in a new picture of the economy and the energy system in 2035 compared with the corresponding model results in the absence of soft-linking. The study also leads to a better understanding of how the models can interact while preserving the respective models' strengths, to give an improved picture of both the flows in the economy and the impact of energy policy instruments.

Keywords: Soft-linking; Computable General equilibrium; TIMES/MARKAL; Climate policy; Energy policy; (follow links to similar papers)

JEL-Codes: C68; D58; Q43; (follow links to similar papers)

25 pages, December 20, 2013

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